Buyers are struggling to source competitive prices for low-end steel products in China as its government improves environmental standards and develops its own industry.

Specialist consultancy, The Beijing Axis, whose clients include major global companies, has reported that firms from outside China are not finding the prices they once did in lower value steel products, including billets and hot rolled coils.

“Overseas buyers are finding that the competitiveness of Chinese low end steel products is not as attractive as it was five years ago,” the China Analyst March 2011 said. “The main reason is the government’s restriction of exports and the growth in related industries.”

Chinese government policy on pollution and the environment has also made finding bargains more difficult for foreign buyers. It has raised concerns about “highly-polluting, energy intensive and resource-dependent industries” including steel, and set out measures to control these industries, the report said.

This involves canceling export rebates, a form of tax relief, which had been re-introduced during the financial crisis. “The rebate cuts were intended to help the government ‘control’ the steel industry and improve energy efficiency by increasing the export costs of the low-end steel products and driving obsolete mills out of production,” the report said.

Chinese producers have moved towards manufacturing higher value steel products, such as pipes and rails, according to the report. “Overseas steel operators are now co-operating with China suppliers to source finished steel products to supplement their own supply in terms of both quantity and product range,” it said.